In February 2016, the Financial Conduct Authority (FCA) launched a Call for Input on the retained provisions of the Consumer Credit Act.
When the FCA took over as consumer credit regulator in April 2014, a new set of consumer credit rules were introduced, and these new rules replaced some provisions of the Act, while other provisions were repealed by Parliament. In all, 82 sections of the Act were abolished. However, some 167 other sections of the Act remain in force, and consumer credit firms are expected to comply with these in addition to the FCA’s rules.
Examples of retained provisions include:
• Section 75, which makes the credit card company jointly liable where goods costing more than £100 are purchased with a credit card
• The laws regarding refunds of fees by credit brokers
• The laws regarding the termination of hire purchase agreements
• The rules regarding the sending of arrears notices
• Certain disclosure requirements
• Certain requirements relating to cancellation of agreements
The FCA has been asked to review these retained provisions and report to HM Treasury on the matter by April 1 2019.
The regulator suggests it may review provisions that “are particularly burdensome on firms without a commensurate benefit, or are particularly complex.” It also suggests it may not review provisions which are functioning well, or where it would be difficult for FCA rules to replace the existing legislation.
An important consideration in the review will be that failing to comply with certain sections of the Act can make a credit agreement unenforceable, whereas this could never be the case simply because the FCA’s rules had been breached.
The FCA invites responses to its call for input by May 18 2016, and will then publish an update in the fourth quarter of this year.
The Treasury’s Notice says that:
“The FCA must arrange for a review of … whether the repeal (in whole or in part) of provisions of the Consumer Credit Act 1974 would adversely affect the appropriate degree of protection for consumers.”
“The review must in particular consider which provisions of the Consumer Credit Act 1974 could be replaced by rules or guidance made by the FCA under the Financial Services and Markets Act 2000; and the principle that a burden or restriction which is imposed on a person in relation to the carrying on of an activity, should be proportionate to the benefits, considered in general terms, which are expected to result from the imposition of that burden or restriction.”
Christopher Woolard, Director of Strategy and Competition at the FCA, said:
“This is a real opportunity for everyone with an interest in consumer credit to help us plan our review and to shape the regime. We are looking forward to working with consumer groups, trade bodies, firms and others to help ensure that regulation remains appropriate in a fast-changing market.”
Fiona Hoyle, head of consumer and mortgage finance at the trade association the Finance & Leasing Association, said:
“We welcome this long-awaited review of the remaining provisions of the CCA, and have already suggested to the FCA a list of out-dated provisions where changes are needed.
“For instance, the wording of statutory notices required to be sent to customers in financial difficulties is abrupt and not in keeping with modern customer service – and a long history of overly complex provisions have, on occasion, left customers and firms with no choice but to seek clarity through litigation.
“We’ll be seeking our members’ input to help make sure that we get a regime fit for the 21st century.”
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.